February 22, 2012

Lawsuit Filed Against Imperial Finance Parent and Underwriters Regarding IPO

October 6, 2011 By

A lawsuit was reportedly filed against Imperial Holdings (NYSE: IFT), parent company of Imperial Finance & Trading, in Florida state court. The Company reported in a Form 8-K filing on October 4, 201 that:

“Although the Company has not yet been served with any complaint, the Company has learned that on September 29, 2011, a putative securities class action complaint was filed in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida entitled Martin J. Fuller v. Imperial Holdings, Inc., et al., against the  Company, its Chairman and Chief Executive Officer, President and Chief Operating Officer, its Chief Financial Officer and Chief Credit Officer, its Director of Finance and Accounting, the members of its Board of Directors who signed the Company’s registration statement, and the underwriters of the Company’s initial public offering alleging certain violations of the Securities Act of 1933, as amended.”

This securities act case ( No. 2011CA015075) is currently pending before Judge David French and names the Company, individuals and underwriters. See the docket sheet here.

Filed Under: Derivative Suits, IPO, Securites Fraud, Securities Act Tagged With: , , , , , , , ,

Imperial Finance Issues a Statement Denying Knowledge of Wrongdoing

September 28, 2011 By

Imperial Holdings, Inc. (NYSE: IFT), the publicly-traded parent of Imperial Finance & Trading, issued a press release after the stock market closed announcing that the Company understood that the Company, its chairman and CEO, and its president and COO were “under investigation in the District of New Hampshire with respect to its life finance business.” The Company stated that it was “not aware of any wrongdoing” and noted that it retained attorneys at an outside law to help the company in responding to the investigation. The Company is headquartered in the Boca Raton, Florida.

Filed Under: Florida, IPO, SEC, Securites Fraud Tagged With: , , , ,

Florida Offices of Imperial Finance & Trading Raided by Feds – Trading of NYSE:IFT Shares Halted

September 28, 2011 By

According to news reports, trading of Imperial Holdings, Inc. (NYSE:IFT) shares on the New York Stock Exchange were halted today after federal authorities raided the company’s subsidiary Imperial Finance & Trading at its Boca Raton, Florida offices.

Imperial Holdings, Inc. is a Florida corporation, and states that it is “a specialty finance company with a focus on providing premium financing for individual life insurance policies and purchasing life settlements and structured settlements.” According to its filings with the Securities & Exchange Commission, the “Company manages these operations through two business segments: life finance (formerly referred to as premium finance) and structured settlements. In the life finance business, the Company earns revenue/income from interest charged on loans, loan origination fees, agency fees from referring agents and unrealized changes in the fair value of life settlements the Company acquires. In the structured settlement business, the Company purchases structured settlements at a discounted rate and sells such assets to third parties”

On February 11, 2011, the Company completed the sale of 16,666,667 shares of common stock at an initial public offering price of $10.75 per share. On February 15, 2011, the Company sold an additional 935,947 shares of common stock in connection with the over-allotment option the Company granted to its underwriters in the Company’s initial public offering.

Shares of IFT securities are down substantially since its IPO. Shares of IFT last traded at $6.30 on September 27, 2011, before trading was halted.

Filed Under: IPO, SEC, Securites Fraud, Securities Act Tagged With: , , , ,

SEC Sues Alleging Ponzi Scheme

September 15, 2011 By

Attorneys at the Securities and Exchange Commission have filed litigation against two Florida men alleging that they defrauded teachers and retirees in a $22 million Ponzi scheme by posing as a private equity fund. Read more about it here.

Filed Under: Florida, Ponzi Scheme, SEC, Securites Fraud Tagged With: , , ,

Florida Securites Fraud Class Action Dismissed Against The St. Joe Company

September 5, 2011 By

Northern District of Florida Judge Richard Smoak dismissed a securities fraud class action complaint filed by class action attorneys representing shareholders of The St. Joe Company.  The complaint concerned alleged misrepresentations of the value of properties the company owned in the Florida panhandle.

St. Joe is now one of the largest real estate development companies in Florida. The company operates its business in four segments: (1) residential real estate; (2) commercial real estate; (3) rural land sales; and (4) forestry.  St. Joe allegedly failed to timely take an impairment charge which caused it to overstate the value of its assets when the real estate market crashed in recent years.

In dismissing the complaint, the court stated:

Plaintiff’s claims of misrepresentation are insufficient to meet the standard of pleading fraud with particularity because they fail to allege that Defendants acted with the requisite scienter and made statements that they knew were materially false at the time. Additionally, Plaintiff has failed to establish loss causation.

See the Order on Motion to Dismiss Class Action Securities Fraud Complaint.

Meyer v. The St. Joe Company, 11-cv-27 (N.D. Fla.) (Smoak, J.).

Filed Under: Class Actions, Exchange Act, PSLRA, Securites Fraud Tagged With: , , , , , , , , , , ,

SEC FILES COMPLAINT AGAINST FOREIGN CURRENCY TRADING FIRM FOR ENGAGING IN ALLEGED “PONZI SCHEME”

July 19, 2011 By

On July 15, 2011, the Securities and Exchange Commission (“SEC”) announced that it had filed a complaint against First Capital Savings & Loan, Ltd. (“First Capital”) alleging that the firm defrauded investors by promising high fixed rates of return from foreign currency trading. The SEC alleges that

First Capital conducted little foreign currency trading, lost money on the little trading that it conducted, and never engaged in any profitable business operations. Instead, after transferring investors’ money to an off-shore account, Lowrance and First Capital secretly diverted investor funds to pay fake returns to other, earlier investors in the classic modus operandus of a “Ponzi scheme.”

SEC v. First Capital Savings & Loan, Ltd., No. 11-CV-3451 (N.D. Cal.)

Filed Under: Exchange Act, Ponzi Scheme, SEC, Securites Fraud Tagged With: , , , , , , , ,

U.S. SUPREME COURT HOLDS THAT JANUS MUTUAL DID NOT “MAKE” UNTRUE STATEMENT UNDER SECURITIES EXCHANGE ACT

June 16, 2011 By

On June 13, 2011, the United States Supreme Court revisited the issue of primary liability under the Securities Exchange Act of 1934. The Court held that a mutual fund investment adviser could not be held liable in a private action under Securities and Exchange Commission (SEC) Rule 10b–5 for false statements included in its client mutual funds’ prospectuses.  The Court found that although Rule 10b–5 prohibits “mak[ing] any untrue statement of a material fact” in connection with the purchase or sale of securities. 17 CFR §240.10b–5 (2010), the mutual fund advisor could not be held liable because it did not make the statements in the prospectuses.

The Court reached this conclusion noting that

For purposes of Rule 10b–5, the maker of a statement is the person or entity with ultimate authority over thestatement, including its content and whether and how tocommunicate it. Without control, a person or entity canmerely suggest what to say, not “make” a statement in its own right. One who prepares or publishes a statement on behalf of another is not its maker. And in the ordinary case, attribution within a statement or implicit from surrounding circumstances is strong evidence that a state-ment was made by—and only by—the party to whom it isattributed. This rule might best be exemplified by the relationship between a speechwriter and a speaker. Even when a speechwriter drafts a speech, the content is entirely within the control of the person who delivers it. And it is the speaker who takes credit—or blame—for what is ultimately said.

See Janus Capital Group v. First Derivative Traders, 564 U. S. ____ (2011)

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Filed Under: Class Actions, Exchange Act, Securites Fraud Tagged With: , , , , , ,

SECURITIES FRAUD PLAINTIFFS NEED NOT PROVE LOSS CAUSATION FOR CLASS CERTIFICATION

June 7, 2011 By

In a June 6, 2011 decision, the United States Supreme Court just reversed the Fifth Circuit in the Halliburton securities litigation holding that securities fraud plaintiffs are not required to prove loss causation in order to obtain class certification. Discussing loss causation, the Court stated:

Loss causation, by contrast, requires a plaintiff to show that a misrepresentation that affected the integrity of the market price also caused a subsequent economic loss. As we made clear in Dura Pharmaceuticals, the fact that a stock’s “price on the date of purchase was inflated because of [a] misrepresentation” does not necessarily mean that the misstatement is the cause of a later decline in value. 544 U. S., at 342 (emphasis deleted; internal quotation marks omitted). We observed that the drop could instead be the result of other intervening causes, such as “changed economic circumstances, changed investor expectations,new industry-specific or firm-specific facts, conditions, or other events.” Id., at 342–343. If one of those factors were responsible for the loss or part of it, a plaintiff would not be able to prove loss causation to that extent. This is true even if the investor purchased the stock at a distorted price, and thereby presumptively relied on the misrepresentation reflected in that price.

According to the Court of Appeals, however, an inability to prove loss causation would prevent a plaintiff from invoking the rebuttable presumption of reliance. Such a rule contravenes Basic’s fundamental premise—that an investor presumptively relies on a misrepresentation so long as it was reflected in the market price at the time of his transaction. The fact that a subsequent loss may have been caused by factors other than the revelation of a misrepresentation has nothing to do with whether an investor relied on the misrepresentation in the first place, either directly or presumptively through the fraud-on-the-market theory. Loss causation has no logical connection to the facts necessary to establish the efficient market predicate to the fraud-on-the-market theory.

See the opinion at Erica P. John Fund, Inc., FKA Archdiocese of Milwaukee Supporting Fund, Inc., v. Halliburton Co. Et al.,No. 09-1403 (June 6, 2011).

Filed Under: Class Actions, Exchange Act, Securites Fraud Tagged With: , , , , , , , , , , ,

INVESTORS FAIL TO PLEAD BROKER’S DUTY TO CONDUCT DUE DILIGENCE

May 23, 2011 By

In a May 18, 2011 Opinion, a United States District Court Judge for the Northern District of Georgia dismissed a Class Action Complaint brought by investors investors against a brokerage firm. The claims arose out of an alleged Ponzi scheme orchestrated by Provident Royalties, LLC, which involved oil and gas exploration.

In addition to dismissing the investors’ fraud claims under Federal Rule of Procedure 9(b), the Court dismissed the plaintiffs’ claim of negligence stating:

To prevail on the negligence claim asserted in Count III, plaintiffs must show, among other things, that defendant owed a legal duty to plaintiffs. Plaintiffs do not allege any facts, or cite any Georgia authority, to support their conclusory statement that defendant owed a duty to confirm the accuracy of Provident’s statements in the PPMs. Neither has the Court found any Georgia authority that imposes a duty on a broker to conduct due diligence concerning the investment materials it provides to clients.

In an attempt to bolster their negligence claim, plaintiffs impermissibly seek to raise the new argument that defendant contracted with plaintiffs to receive a fee in exchange for performing due diligence. Such an allegation, made for first the time in response to a motion to dismiss, is plainly inappropriate. Moreover, even if the Court were to consider the new allegation, the complaint would still be deficient because plaintiffs do not allege that they relied in any way on defendant’s efforts. Nor would such reliance be reasonable, as the PPMs expressly advise potential investors that they should only rely on information provided by Provident itself.

Brown v. J.P. Turner & Company, No. 09-cv-02649-JEC, (N.D. Ga. May 17, 2011) (internal citations omitted) (emphasis added).

Filed Under: Class Actions, Due Diligence, Exchange Act, PSLRA, Securites Fraud Tagged With: , , , , , , , , , , , , ,

DISTRICT JUDGE ENTERS JUDGMENT FOR BANKATLANTIC IN CLASS ACTION LAWSUIT

May 12, 2011 By

In 112 page Order entered on April 25, 2011, a United States District Court Judge for the Southern District of Florida reversed a jury verdict that awarded class member-Bank Atlantic shareholders $2.41 per share in damages based on alleged fraud. Among other things, the Court held that “there was insufficient evidence to support the Jury’s finding of loss causation [and] even had Plaintiffs made a sufficient showing of loss causation, they did not produce sufficient evidence to support an award of damages in any amount.”

According to a January 10, 2010, Riskmetrics Report, only eight securities class action cases have been tried to a verdict since 1996. Only seven additional securities class action cases have been tried since 1996 (but not to a verdict), where the conduct at issue was alleged to have occurred after the PSLRA was enacted.

Filed Under: Class Actions, Exchange Act, PSLRA, Securites Fraud Tagged With: , , , , , , , , , , ,
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